IRS updates escrow rules on early termination restrictions

Article Abstract:

The IRS has revised earlier escrow rules on early pension plan terminations with Revenue Ruling 92-76. Highly paid employees have long had legal restrictions on the lump sum distributions they could receive from defined benefit pension plans so that they could not threaten a plan's solvency by making large withdrawals. Restricted employees will be able to receive lump sum distributions if they deposit at least 125% of the restricted amount in escrow, get a bank letter of credit for a least 100% of the restricted amount or post a bond of at least 100% of the restricted amount.

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Good faith reliance on professional advice not always prudent

Article Abstract:

Corporate directors were held to be the fiduciaries of an unfunded retirement plan and to have breached their fiduciary duties by not meeting ERISA's funding and trust rules and letting the plan participate in prohibited transactions. The directors had relied on the informal opinion of an attorney-board member that their plan was not an ERISA plan, and the court held that this reliance did not shield them from liability and that in any case the reliance was unreasonable.

Cases, Fiduciary duties

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Voluntary Compliance Resolution Program opens on experimental basis

Article Abstract:

The IRS will run the experimental Voluntary Compliance Resolution (VCR) Program through the end of 1993. The program allows employers to avoid disqualification of their plans by voluntarily disclosing and correcting operational defects and paying a voluntary compliance fee. The plan sponsor must also put in place procedures to prevent recurrence of such defects.

Planning, United States. Internal Revenue Service

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